The Lone Wolf's Pyongyang Triumph
The Lone Wolf of Wall Street's trip to North Korea made many people uneasy. Even though North Korea was moving toward becoming a normal nation, plenty of people still vividly remembered its days as a rogue state in the '80s and '90s. Yoo Jae-won's parents and relatives in South Korea were especially anxious. Yet their fears proved unfounded. After completing his four-day, three-night schedule without incident, Yoo Jae-won returned safely. The fact that he had carried out his planned itinerary without disruption meant the business in North Korea had been a success. There had been none of the usual frustrations that came with doing business in the North.
- ID Westinghouse Achieves First Commercial Sale of Thorium Reactors!
- North Korea to Build Two 2GW Thorium Reactors!
- The 1+1 Event Was No April Fools' Joke. Two Reactors for the Price of One!
- Only Two Spots Left! The Bidding War Is Fierce!
Even before Yoo Jae-won's plane departed North Korea on the final day, the news broke first, reported as an exclusive. Upon arriving in Pyongyang, he had felt some concern about dealing with a country as unpredictable as North Korea. The regime was notoriously sensitive to anything involving the word "Juche," and being forced into something by outside pressure usually triggered their reflexive defiance. In a way, the thorium reactors could have been framed as proof of North Korea's denuclearization, giving them every reason to balk. Yet things had gone surprisingly smoothly. It turned out the North was far more interested in the feast than the ritual. And there were two feasts on offer. One was the long-desired normalization of relations with the United States, confirmed by President Al Gore's statement that diplomatic talks would begin immediately after the groundbreaking ceremony for the thorium reactors. The other was the ESPO Pipeline project. North Korea had been salivating over that deal as well. Simply by allowing the pipeline to cross its territory, they stood to secure crude oil supplies plus generous land-use fees and transit royalties. The North Korean leadership wanted Yoo Jae-won to use his influence on their behalf in the ESPO project too. After all, Chevron was the second-largest shareholder after Russia. Though technically an independent entity, both the North Korean leadership and Kim Jong-il believed Yoo Jae-won wielded decisive power over Chevron. Yoo Jae-won saw no need to correct that perception. Instead, he promised to put in a good word with both Chevron and the Russian organizers. He also secured everything he could for himself, including exploration and development rights to North Korea's mineral resources. The payment for the thorium reactors would be made in full, in U.S. dollars, in stages according to construction progress. The 1+1 promotion had already left no room for discounts, and the North Korean side had not asked for any. The only point of contention was when the mineral rights could be exercised. Since they were being granted in exchange for the reactors, one could argue the rights should activate once the reactors came online. Yet there was also logic to tying them to the moment the contract was signed by Yoo Jae-won and Kim Jong-il. After intense negotiations, they settled on a compromise: the rights would become exercisable once the foundation work was complete and reactor installation began. Yoo Jae-won was disappointed by the North's caution but did not show it. His interest in North Korea's mineral resources was not for personal gain but to reshape the balance of power in East Asia. If things unfolded according to his vision, North Korea would be the biggest beneficiary. Their hesitation was frustrating, but at least the compromise allowed work to begin by mid-next year.
"That said, Kim Jong-il looks like he might go earlier than expected. That's worrying."
With a sigh of relief, Yoo Jae-won recalled the image of Kim Jong-il at the signing ceremony. His first impression had been how gaunt the man looked. Kim Jong-il had always carried a bit of weight, with a rounded face and a slight paunch. But the man he had seen yesterday showed no sign of that. Losing weight might have suggested better health, yet with Kim Jong-il the opposite was true. The weight loss made him look ill, as though diabetes or some deeper ailment was wasting him away. If he died earlier than anticipated, the succession could shift dramatically.
"Well, that's something for the North Koreans to worry about."
After a moment's thought, Yoo Jae-won brushed the concern aside. With the United States having recognized the Kim family regime, the possibility of a coup had dropped to near zero. That left only two viable successors: Kim Jong-nam or Kim Jong-un. Whichever one prevailed, they would have no choice but to present a different face from the pre-regression North Korea.
"North Korea is settled, then."
Yoo Jae-won closed all the North Korea-related files on his laptop screen. He then turned to the files uploaded to the group network and his work ID Talk account. Even while he had been in North Korea, ID Group had not stopped moving. Reports and approval requests had piled up. He had deliberately avoided opening them during his stay, so the backlog was several times larger than usual. The reason was simple: hacking. The internet had finally reached North Korea. With unrestricted access to the latest computers, Pyongyang now had everything from the newest iWorks models released by ID Technology to the latest NewEgg machines. The city even boasted a reasonably dense network of open Wi-Fi, making wireless internet convenient. Yet true internet access, the kind that connected to the outside world, still required a special code. External connections remained extremely restricted, but compared to the pre-regression era, the change was night and day. Back then, even under harsh conditions, they had managed to build a strategic hacking unit. Now, with far better resources, that unit would only have grown stronger. Some of the Chinese hacking attempts against Yoo Jae-won and ID Group's cloud systems were almost certainly North Korean operations disguised as Chinese. That was why, while in North Korea, he had made voice calls but avoided any data communication with the cloud systems.
"Oh? President Vincent pulled off something big."
The first document Yoo Jae-won opened once the restrictions lifted was the report from Vincent Greenhill, president of ID Investment. It concerned options trading on subprime mortgage-backed securities. The report began several days earlier, right before Yoo Jae-won had departed for North Korea.
- Subprime Mortgage Default Rates Rising!
- Unsecured Loans Must Be Regulated.
"Same old song again."
The man grumbling at the ID Investment report on his monitor was Aaron Fuld. Dressed in a bespoke Tom Brown suit with a perfectly styled haircut, he projected an image of crisp, polished sophistication. He was the CFO of Lehman Brothers, one of the world's premier investment firms. Aaron Fuld, like the rest of Wall Street's elite, knew full well that ID Investment had been warning about the dangers of subprime mortgages since early last year. Their every move was closely watched. Every major firm on Wall Street had its own legendary investment success stories. Some had made fortunes in gold. Others had taken bold positions in struggling Australian mining companies and struck it rich. But the only firm with an unbroken record of success was ID Investment. They had burst onto the scene during the Gulf War in the early '90s with an astonishing windfall in oil futures. They had grown further by investing in South Korea and Japan during the Asian financial crisis, ridden the IT bubble to its peak and exited before it burst, participated in ID Group's IPO and aggressive acquisitions, and most recently scored massive gains in gold and oil. Any single misstep would have resulted in enormous losses, yet there had been none. In just over a decade, ID Investment's name had become legend on Wall Street. Though the exact size of their assets remained undisclosed, many on the Street estimated it at several hundred billion dollars at minimum. And since last year, ID Investment had been consistently issuing reports on one subject: subprime mortgages. The reports did not recommend investing. They warned against it. That was what irritated Aaron Fuld the most.
"Even monkeys fall from trees eventually."
Subprime mortgage products were currently the hottest commodity on the market. Housing prices kept rising, and the fear of missing out drove more and more people to buy homes before prices climbed further. Among them were those who could not afford homes on their own, which was why so many banks were willing to offer mortgages even to borrowers with questionable credit. Subprime-backed option products were selling briskly. With the economy booming, vast amounts of liquidity were flowing through banks and investment banks into the housing market. Even if a borrower defaulted, it was not a real problem. The foreclosed home could simply be resold to recover the loan, often with a profit. After all, housing prices were still climbing.
"Why stop when things are going so well?"
To Aaron Fuld, the warnings made no sense. Lehman Brothers had poured over five hundred billion dollars into subprime mortgages and was generating fifty billion dollars in annual profits from them. The firm was enjoying an enormous bonus bonanza, and Aaron Fuld's own cumulative performance bonuses had already surpassed one hundred million dollars. He had no patience for ID Investment constantly pouring cold water on such a lucrative business.
"Hmm?"
Then a particular passage caught his eye.
- Joseph P. Kennedy, father of President John F. Kennedy, predicted the Great Depression after overhearing shoeshine boys on Wall Street discussing stocks. With homeless people now taking out unsecured loans to buy homes, it is time to heed Joseph P. Kennedy's lesson.
"Unsecured loans?"
The clearest sign that the stock market was overheating was the appearance of unlikely participants on the trading floor. If monks who belonged in the mountains or housewives started showing up in droves, you could be certain a bubble was forming. The fact that homeless people with no assets were using unsecured loans to buy homes was supposedly proof that subprime mortgages were dangerous. Yet that was not how Aaron Fuld saw it. In capitalism, the price of a commodity depended on demand. Homes were no different. The more people wanted them, the higher the price rose. Therefore, even if unsecured loans were needed to boost demand, overall profits would surely increase. Of course, lending to people so incapable that they could not even provide collateral carried risk, but when you factored in the mortgage itself and the linked options market, the potential gains more than offset that risk. The math was clear.
The phone rang just as he was about to run the numbers on his computer. It was his secretary.
"Yes? What is it?"
- A guest has arrived requesting to see you, sir.
"A guest? I thought my only meeting today was in the evening."
- Yes, sir. They apologize for coming without an appointment. However, the visitor is Vincent Greenhill, president of ID Investment. He says he has come to make a significant proposal regarding subprime mortgage products.
Aaron Fuld normally refused to meet people who arrived without appointments. Most of them simply wanted to pitch investments, and the vast majority were worthless. But Vincent Greenhill was different. Especially when the topic was subprime mortgages. It was oddly coincidental that the very report he had been reading was ID Investment's warning about subprime products.
"Hmm. Show him to the reception room."
Curiosity got the better of him. What kind of proposal would bring the man here in person? After a brief handshake and greeting in the reception room, Aaron Fuld and Vincent Greenhill got straight to the point. Vincent spoke first.
"It seems Lehman Brothers views the outlook for subprime mortgage products quite favorably. That is why I came to make a proposal. If you are as confident as you claim, please create a put option product linked to the returns of subprime mortgages. ID Investment will purchase it. Unlimited quantities."
Vincent Greenhill's offer was so bold it exceeded even Aaron Fuld's imagination.